Leeds City Council Bill (By Order)
	 — 
	Nottingham City Council Bill (By Order)
	 — 
	Reading Borough Council (By Order)

Wayne David: I commend my hon. Friend on his tremendous enthusiasm on behalf of seaside towns, and Rhyl in particular. He is absolutely right to stress that partnership is vital to success. The Rhyl city strategy brings together a range of partner organisations behind the shared strategic goal of reducing worklessness in the town. The Rhyl city strategy recently benefited from the Department for Work and Pensions deprived areas fund and the Welsh Assembly Government's decision to provide funding for employability training. I would be delighted to join my hon. Friend in visiting some of those projects in Rhyl.

Wayne David: I know that the hon. Gentleman does not attend Wales questions very often, but they are a serious business, and it is important to recognise that tourism is one of the essential elements that creates a dynamic economy in Wales. It is very much our lifeblood, so I commend the Welsh Assembly Government on their tourism strategy, which is making great strides. There is a strong partnership between central Government and the Welsh Assembly Government to ensure that all aspects of tourism are effective—including, I suspect, the consumption of candy floss.

Wayne David: I commend my right hon. Friend on the excellent work that he did as Secretary of State for Wales in taking forward the project. It is important. The Sustainable Development Commission has given it a positive recommendation, and there is a strong case for further investigation into a sustainable Severn barrage. I give a commitment to the House that the work will continue.

Colin Burgon: Does the Prime Minister agree that we should crack down on unscrupulous moneylenders such as Mobile Money Ltd., which recently sent a letter to a student constituent of mine, offering to lend her £5,000 in cash, with no credit checks, at an interest rate of 378 per cent.? Her father was outraged; does the Prime Minister share that outrage?

Gordon Brown: The national debt, even after the difficulties that we go through, will be lower as a percentage of national income than in France, Germany, Italy and Japan, and almost certainly in America. The message that the Leader of the Opposition is trying to communicate is that we can do something without spending any money. The truth is that his policy ends up doing absolutely nothing to give real help to families and businesses now. If he has a proposal, it means that he would have to spend to meet it. The fact is that the Conservatives would do nothing in the end and leave the families of Britain without real help and support. We are not going to take the do nothing road of '80s and the '90s; we are going to give real help to families and businesses now.

John Healey: With permission, Mr. Speaker, I should like to make a statement on finance for English local authorities in 2009-10. Last year, I announced the first ever three-year settlement, giving greater certainty, flexibility and equity in funding for local government. Today, I am confirming the second year, 2009-10, of this settlement for formal consultation, and the indicative allocations for 2010-11. My hon. Friend the Minister for Security, Counter-Terrorism, Crime and Policing is doing the same for police authorities today. In both years, the formula, or core, grant figures are the same as we set out in this House in January. Alongside this, I am publishing second and third-year figures for 70 grants from nine departments, 43 of which will be paid each month through the new area-based grant, with no strings attached.
	Let me be clear—in line with the Government's policy on three-year settlements, it is not intended that the 2010-11 formula grant proposals will be changed from those published today. Formula grant, which includes revenue support grant, redistributed business rates and police grant, will total £28.3 billion in 2009-10 and £29 billion in 2010-11—increases of 2.8 per cent. and 2.6 per cent. respectively. We will also continue with the same grant floors, so every authority will receive a formula grant increase in every year of this three-year settlement. In total, Government revenue funding for local authority services will be £73.1 billion next year and £76.4 billion the year after—overall grant increases of 4.2 per cent. and 4.4 per cent., in line with the figures that we published last year.
	This means that with a Labour Government, councils have had above inflation increases every year since 1997, and now have an extra £8.9 billion through this current three-year settlement. In spite of significant pressures on public finances, this confirms the Government's continuing commitment to local government and continuing investment in the local services that people need. Indeed, in the face of an expected recession, this commitment is even more important. I know that there are pressures on local government—costs, demand for services and revenue streams are all affected by the economic downturn, just as they are for national Government. Our three-year commitment on the core grant and three-year figures for specific grants help councils to take tough longer-term decisions on their budgets. Our mainstreaming of an extra £5.7 billion of grants and the removal of ring-fencing help councils to manage their finances, and our delivery of a single set of 189 performance indicators, together with the local area agreements, help councils to set their priorities for their area.
	Included in the grant figures are allocations for the nine new unitary authorities that start in April 2009. I have laid before the House, today, regulations to ensure that the new councils will have the powers that they need to set their budgets and council tax for 2009-10. Also today, I am launching a consultation on alternative notional amounts, which will enable like-for-like comparisons to be made on the budget requirements for the new unitary councils if the Government decide to use our capping powers.
	Last year, I explained to the House that we expect of local government the same 3 per cent. annual efficiency improvements that we expect of the rest of the public sector. Delivering that will mean the equivalent of £89 in council tax for the average band D home this year, and that councils will have an extra £4.9 billion, over three years, to spend on improving services or controlling council tax pressures. The public have a right to expect better value for money from local and national Government. At this time, people expect councils to tighten their belts like everyone else, so I am today publishing figures on the new efficiency savings that councils expect to make in 2008-09. At just more than £1 billion, it is similar to what councils have achieved in the past, but that is not good enough now. Councils need to find more than £1.5 billion in new savings every year.
	The efficiency figures that I am publishing also show how each council measures up to its efficiency challenge. To ensure that local residents have easy information about their council's efficiency performance, and to encourage them to challenge their council to do better, I have decided, following consultation, that councils will be required to set out standard efficiency figures on council tax bills from next year.
	The introduction of the three-year settlement, the reduction in ring-fencing, the new local area agreements and the new local performance framework offer substantial opportunities for better working and efficiencies across local services to manage pressures on council tax bills, including in the areas being examined by the five work streams in the operational efficiency programme that was set out in the pre-Budget report earlier this week. For the future, we will build on that to see, ahead of the next spending review, how local authorities and their partners can prepare for the tough challenges that they, like all the public sector, will face from 2011-12.
	On Icelandic banks, authorities are uncertain how much they will recover as they prepare their budgets so soon after the failure of those banks. I therefore propose, exceptionally, to make a regulation so that they need not make provision, in their 2009-10 accounts or budgets, for any possible loss on those investments. That will give them time to adjust their medium-term financial plans and time to be clearer about the recovery of their money before they take decisions that will affect their budgets or council tax. We are writing to all authorities today, and I will issue a draft regulation for consultation shortly.
	On council tax, I made it clear to the House, last year, that the Government expected the average council tax increase in 2008-09 to be substantially below 5 per cent. The average actual increase was 3.9 per cent., which was the lowest increase for 14 years and the second lowest increase ever. We also kept our promise to deal with excessive increases by taking capping action against eight authorities. In continuing this, we are today designating the police authorities of Cheshire, Leicestershire and Warwickshire, and proposing maximum budget requirements that will limit their council tax increases to about 3 per cent. next year. For 2009-10, the Government again expect the average council tax increase in England to be substantially below 5 per cent., and we will not hesitate to use our capping powers, as necessary, to protect council tax payers from excessive increases.
	In conclusion, I confirm the second year of the three-year finance settlement. I recognise that it is tight, but it is fair and affordable, and it continues our increasing investment in council services. To help, during these tough economic times, our settlement maintains the certainty, flexibility and equity that local government says it wants from central Government. We know that councils are capable of innovating, of managing change and of improving efficiency. The challenge on all those fronts is set to become still greater, and councils must demonstrate that they are equal to that task. I commend this statement to the House.

Mike Hancock: When will the Minister publish his evidence to support the requirement for local government to save a further 50 per cent. in efficiency savings? He must have had some pretty good evidence that that could be delivered. I should also be interested to know what he means by "substantially below 5 per cent."? Does he have a figure for the rise in the capping level? May I echo the sentiments of the right hon. Member for Skipton and Ripon (Mr. Curry), who raised the issue of concessionary bus fares, because undoubtedly some local authorities will make cuts in services to meet the obligation on concessionary fares that the Government placed on them? That is not right, and the last thing that we want is consultation. What local government needs is a remedy and an answer to the Government's promise fully to fund that policy.

George Osborne: I beg to move,
	That this House has considered the matter of the Pre-Budget Report.
	On behalf of many hon. Members on both sides of the House, I begin by thanking you, Mr. Speaker, for taking the exceptional step of granting this emergency debate. You have protected the interests of Members on both sides of the Chamber who want to hold the Government to account.
	The public would have found it extraordinary if the House of Commons had not properly considered the huge tax measures put forward by the Chancellor on Monday, or indeed the tax measures concealed by the Chancellor on Monday. Those measures are being debated by families across the country who fear their impact, and it is astonishing that the Government did not want them debated in the House of Commons.
	The only explanation is that the Prime Minister is running away from the argument, because he knows that he is losing the argument. This Budget started to unravel from the moment it was delivered. The doubling of the national debt shocked the entire country. [ Interruption .] Labour MPs may not be shocked, but the country is shocked to realise that the Government have taken it to the edge of bankruptcy. Within minutes of the report being published, it became clear that the national insurance rises would, contrary to the Chancellor's claims, hit people on modest incomes. The small print of the Budget book shows that the Chancellor had been less than candid about the stealthy duty rises on alcohol and petrol. Then we discovered the £100 billion black hole in the tax revenues with no explanation of how it will be filled.

George Osborne: The hon. Gentleman should have paid attention on Monday, because the Chancellor—[Hon. Members: "Answer!"]. I am going to answer. The Chancellor introduced a version of the fuel duty stabiliser on Monday.

George Osborne: If hon. Members will allow me, I shall make some progress and take some interventions later. I am aware that many Members want to speak in the debate, and that Front-Bench speeches have a time limit. Therefore, I shall proceed. [ Interruption.] Well, I shall take some interventions later if the hon. Member for Weaver Vale (Mr. Hall) can think of some better ones.
	Now, let us be clear. We know about the secret plan for VAT; it is totally—[ Interruption.]

Mr. Speaker: Order. It is the hon. Gentleman's privilege to give way to who he wants to give way to. [ Interruption.] Order.

George Osborne: I am glad that I took that intervention, because it enables me to say that the budget deficit next year will be the highest on record—higher than when Denis Healey went to the International Monetary Fund—and the national debt, at 58 per cent., is the highest on record. Let me remind the hon. Gentleman that this Government inherited a golden economic legacy from the previous Conservative Government; but this Government are bequeathing to their successors a complete basket case of an economy.
	The debt figures are truly shocking, as the hon. Gentleman has just reminded us: the national debt is set to double to £1 trillion, and there is that record 8 per cent. deficit. We used to think of Britain as a low-tax, low-debt economy that was one of the most successful in the world, but now we must get used to seeing Britain as the rest of the world does: as a high-tax, high-debt country that cannot get a grip on its public finances.
	Let us turn to table B10 on page 198. [ Interruption.] It is probably not in the Whips' handout, but if Government Members were to read the report, they would see that for the first time in living memory the Treasury forecast does not even try to pretend that the current budget will come back into surplus in the medium term. The Chancellor's assertion on Monday that it was all okay, because, by
	"2015-16, we will again be borrowing only to invest,"—[ Official Report, 24 November 2008; Vol. 483, c. 493.]
	was greeted with total derision in the Chamber. He was 100 per cent. wrong about the borrowing forecasts that he made just eight months ago, and now he wants us to take him seriously when he gives us borrowing forecasts for seven years' time. That is not in the next Parliament but in the Parliament after next. They are ridiculous, fantasy figures from a Government who have completely lost the ability to manage taxpayers' money and control public expenditure.

Nicholas Soames: Does my hon. Friend agree that when the Prime Minister was still walking out with prudence, he was right when he said that you cannot spend your way out of recession?

George Osborne: The hon. Gentleman more than makes up for it by being too voluble at Prime Minister's Question Time.
	The growth forecasts that the Chancellor has produced are more optimistic than the Bank of England's, more optimistic than the IMF's and more optimistic than the OECD forecasts that were published yesterday. The OECD said:
	"The downturn is expected to be severe in economies most vulnerable to the financial crisis or to sharp house price falls. These include Hungary, Iceland, Ireland, Luxembourg...Turkey and the UK."
	That is not exactly great company for a country that used to the envy of Europe. If the OECD's growth forecasts are right, that will automatically add £10 billion to the Government's borrowing forecast in 2010 alone.

George Osborne: I shall give way to the hon. Member for Wolverhampton, South-West (Rob Marris).

George Osborne: It is going to be the next Conservative Government who sort out the economic mess. Now—[ Interruption.]

George Osborne: I am going to make some progress—[ Interruption.] I have taken a lot of interventions; we shall see whether the Chancellor takes anything like as many.
	I turn to the tax changes in the Budget. First, there are the VAT changes—let me start with the temporary VAT reduction, before coming to the permanent VAT rise. The Government do not seem to realise that the stimulating effect of a temporary reduction when prices in shops are already falling is more than outweighed by the cost of a permanent rise in taxes on the incomes of those whom they expect to go shopping. This is what the senior tax partner at Grant Thornton said after the Chancellor spoke on Monday:
	"It's the wrong time to cut VAT, as it's an inefficient use of taxpayers' money when you have a trade deficit. And it's an odd thing to do when inflation is falling and some fear we are heading for deflation."—
	[ Interruption.] Labour Members do not like what the senior tax partner at Grant Thornton says. How about this, from President Sarkozy of France? He asked yesterday why
	"Should we use up our available room for manoeuvre on reducing prices when prices are already falling?"
	The German Chancellor has also ruled out a temporary reduction in VAT—[ Interruption.] I am being asked whether we will vote against it, but the Government are not giving anyone a chance to vote on the reduction before it comes into force on Monday. It is only because we called for an emergency debate that we are even discussing it in the House of Commons.
	Far from rushing to support the move, retailers have been quick to point out the administrative nightmare of re-ticketing prices, reprinting catalogues and price lists and reprogramming cash tills, which will cost them tens of millions of pounds—[ Interruption.] They talk about prices, and that brings me to the permanent VAT rise—

Alistair Darling: I will give way to hon. Members on both sides of the House, but, first, I should like to address the important matter of VAT. The shadow Chancellor asked me to address a particular question about the impact assessment that referred to a higher rate of VAT, which was lodged on the website of Her Majesty's Revenue and Customs, and which has been the subject of a lot of newspaper reports. I want to deal with that, head on.
	First, as the Prime Minister said earlier at Prime Minister's questions, in the run-up to the pre-Budget report, I considered—as any Chancellor would—a large number of options about just about every aspect of tax and spending, as the House would expect. As I had to raise money in order to ensure that our borrowing is reduced in the medium term, I concluded that the best and fairest way to do it would be to increase national insurance contributions by 0.5 per cent., as I announced on Monday. I also said that while VAT would come down to 15 per cent., it would return to its 17.5 per cent. rate at the end of 2009. That is the Government's position, and that remains the Government's position.
	When I saw press reports this morning that an impact assessment containing a reference to 18.5 per cent. of VAT had been put on a website and been signed by my right hon. Friend the Financial Secretary, I asked the permanent secretary at the Treasury to find out what had happened, as the House would expect. What I found was this: the Financial Secretary had not, in fact, signed that document. It transpires that someone within either the Treasury or Her Majesty's Revenue and Customs had typed the Financial Secretary's name alongside an impact assessment that he did not know about, he had not seen and he had never authorised.  [ Interruption. ] The shadow Chancellor asked me for an explanation, and the House is entitled to it. That is it. In other words, the Government's policy is and remains that VAT will fall to 15 per cent. at the beginning of next week. It will then rise to 17.5 per cent. In other words, our policy is exactly as I set out in the pre-Budget report on Monday.

Alistair Darling: I was going to say that I know that the hon. Gentleman was here in the 1980s and'90s and that he represents what I might call the decent wing of the Conservative party, but I would not join him in respect of his last remark.

Alistair Darling: If I may, I want to deal with the important point about banking that the shadow Chancellor made.
	First, I know that both the shadow Chancellor and the Leader of the Opposition have made much of saying that radical monetary action is necessary. I believe that such action is necessary, but those policies—to reduce interest rates, for example—are only part of solution. As many have said, when interest rates come down, one would normally expect the impact of that to be transmitted directly into the wider economy and we would all benefit. Part of the current problem, however, as the Governor of the Bank of England, the International Monetary Fund and the OECD have said, is that these are not normal times and the normal way in which the effects of the central bank's interest rates are translated straight into the wider economy is simply not happening. That is why I believe that, yes, it is important to have appropriate monetary policy, which has to be decided by the independent Bank of England, but that it has to be supported by Government action to support the economy as well. In other words, fiscal policy has to support monetary policy.

Vincent Cable: If the Government were really serious about VAT reform, they would be considering the VAT on home improvements, which is one of the obvious areas that could change the picture.
	The Liberal Democrats believe that there should be a significant, but permanent tax cut for low-paid workers; we have suggested the equivalent of £16 billion to £18 billion, which is in the ballpark of the Government's tax proposals. We propose that that should be paid for by people higher up the income scale. Of course, the Government have put forward what they regard as a redistributive element—the new top rate of tax, which will be 45p in the pound. I have taken an intervention that suggested that that will raise a lot of money, so I shall repeat that the Institute for Fiscal Studies says it will raise no revenue. We should know that, because for many years when we had a similar proposal, the Government told us that it would raise no money. They are now putting this forward, apparently aware of the consequences of their own arguments. It will raise no money for the following reason: why would people with a high income pay a 45 per cent. marginal rate of tax on it when they could convert it into capital and pay 18 per cent.. as any tax accountant would tell them to do? Why would they not persuade their employer to give them relief from higher income tax and put it into a pension pot that, again, will accrue relief from the higher rate tax of 45 per cent? Those are the obvious measures that any Government who are serious about income distribution need to address.

Ruth Kelly: I intend to discuss how to try to get banks lending to each other again in due course. Creating a "bad bank" to deal with toxic assets is not necessarily the right way forward, partly because it is incredibly difficult to value those assets appropriately and the Government end up taking all the very worst of the debt without appreciating its true value. Of course, everything ought to remain an option as we go through these difficult times.
	The Opposition have failed to appreciate a fact that was the essential point of my right hon. Friend the Chancellor's statement. In a global credit crunch the impact of monetary policy is at best uncertain and at worst negligible. Evidence mounts day by day, week by week, and even though the 1.5 per cent. interest rate cut was passed on to people with tracker mortgages, credit conditions remain incredibly tight. That is the case for mortgage holders but more particularly for small and medium-sized enterprises. There is evidence that good going concerns are being refused credit, that the availability of credit is shrinking and that the price of terms that have already been agreed has also increased.
	Although the 1.5 per cent. cut has been passed on to those with tracker mortgages, the spread between inter-bank lending rates and base rates remains stubbornly high and there is no immediate sign that it will be reduced. In such circumstances, it would be hugely unwise to rely on monetary policy as the way out of the recession. Of course, monetary policy might help somewhat and if there are further deep cuts in interest rates they might act as a stimulus, but we should not bank on those measures as the only stimulus.
	In precisely such credit constraint conditions, fiscal policy becomes ever more potent. I am glad that the Opposition have at least come to realise the importance of using the automatic stabilisers—a term that is now entering common currency—as tax receipts fall during a recession and benefit payments rise. It is incredibly important that the automatic stabilisers are used not to provide a fiscal stimulus—they do not do so—but to prevent fiscal policy from tightening and exacerbating any potential recession.
	All credible economic commentators around the world seem to concur that a fiscal stimulus is needed, rather than just a use of the automatic stabilisers. In fact, the Bank of England, which published its quarterly inflation report yesterday, assumed as its central prediction that output would start to pick up from the middle of next year. The Bank of England, far from making the Government's case look somehow out-of-step and over-optimistic, also expects growth to resume from the middle of next year. However, it did not take into account the potential impact of any fiscal stimulus. The report states that
	"the slowdown may be less pronounced if...there is a stronger stimulus from fiscal policy."
	It is not just the Bank of England. The Institute for Fiscal Studies welcomed the fiscal stimulus this morning, as did the CBI. Abroad, we are backed in our resolution by the IMF and by most credible economists and commentators. The argument against the use of fiscal policy usually rests on the following facts. First, people think that it takes too long to implement and if not carefully designed can end up turning a fledgling recovery into an unsustainable boom. Secondly, some people argue that if taxes are cut in the short term people will not necessarily spend the extra money because they think that taxes will rise in the medium term. Thirdly, people think that a fiscal boost could add to inflationary pressure. The likelihood of inflationary pressure being a problem seems entirely remote and should not keep many people awake at night.
	Let me turn to the first two potential problems. Will the cut in VAT and bringing forward spending take too long to implement? Absolutely not. As we know, the cut in VAT has been turned on take effect almost immediately and is clearly temporary, so VAT will rise in the future. The beauty of the VAT reduction is that unlike direct income tax cuts it can be implemented virtually straight away and can clearly be seen to be temporary. Given the potential severity of the downturn, it does not seem at all plausible that the measure could end up stoking a domestically generated boom. I find it extraordinary, incidentally, that the Liberal Democrats are arguing that a permanent funded tax cut could ever act as a temporary fiscal stimulus, but I leave that to their spokesman to explain in the future.
	Is it the case, as the Opposition sometimes seem to argue, that people would just pocket the reduction in taxes and not spend the money to produce the desired stimulus? I find that hard to believe given that households across the income spectrum are credit constrained. That is what is happening with the global credit crunch. When people have more money in their pockets to spend, they tend to spend it. The Government have made a fairly conservative estimate, saying that about half will be spent and half will be saved. However, even if half that money is saved it will be because people are paying back their debts, and that will place them in a stronger position to spend in the future.
	The Government forecast that the reduction in the impact of the recession will be about half a percentage point. It is easy to underestimate that effect. That reduction will keep a much larger number of people in their jobs throughout this downturn than would otherwise have been the case. It will keep more small businesses afloat, many of which would have gone bust during the economic downturn.
	Of course, all that is likely to be far more powerful if countries act together rather than independently. When people spend their money on fiscal boosts, some of it will clearly go on imports from other countries. If everybody acts together, the impact of a fiscal stimulus is likely to be far more powerful. For that reason, we should welcome the fact that Japan, Germany, Spain, South Korea and China have announced or are planning a significant stimulus package. In particular, we should welcome the move announced yesterday by the United States. The injection of $800 billion into the US economy should have a pronounced effect not just on them but on us.
	What happens to the public finances over the medium term is obviously important when it comes to the UK's position. I noted that the hon. Member for Tatton (Mr. Osborne) talked about the seven-year figures as fantasy figures. I cannot agree with that. What is the alternative? When a global credit crunch causes permanent deterioration in and damage to the output of the economy and when one cannot foresee how quickly corporate profitability will increase in the future—it will clearly remain low in the medium term—it is right that we should take our time before public finances are brought back to balance. The alternative, which would be to bring them back to balance much more quickly, would risk tightening fiscal policy at a time when another shock might come along in the system and make it worse.

Frank Field: Is not it a fact that Labour Members and some Opposition Members feel that the Government should make every sensible move that they can to prevent this downturn from becoming a rout? I want to ask about one aspect of the Budget—making proper compensation for the 10p tax losers, which the Government have not done. Should they need to create further stimulus, they should single that group out for special attention.

Andrew Miller: I will be brief, because the winding-up speeches are due to start at six minutes past 4.
	Following the intervention by my right hon. Friend the Member for Sheffield, Brightside (Mr. Blunkett), I have been surprised by the way in which the official Opposition have derided the notion that the problems started in north America. The world has changed, and we now live in a world of instant communications where events spread very quickly. That applies to not only banking and commerce, but to many aspects of our society, and global events that begin with a pinprick will spread around the world very quickly in other areas, too. Anyone who has read anything about chaos theory will understand what I mean. That is why it is so important—no one from the Opposition has mentioned this—that my right hon. Friends the Chancellor and the Prime Minister get on the global stage and argue Britain's corner and Europe's corner. If we do not do so, we will let down our country extremely badly.
	The hon. Member for Tatton (Mr. Osborne) and I have two things in common. First, we are both Cheshire Members, and I hope that he will reflect on what I say towards the end of my remarks, because some of his constituents work for companies in my constituency. Secondly, we both took a holiday in Corfu, but I shall not develop that point. Mine was a considerably cheaper version.
	I am also concerned to hear the surprise—the shock, horror—based on the idea that my right hon. Friend the Chancellor did not look at dozens of ideas, and did not ask civil servants, officials and colleagues to present alternative propositions to him. Of course, he did. We would be here lambasting him if there were evidence that he had not examined dozens and dozens of ideas placed in front of him.

Andrew Miller: No, because I have to sit down at six minutes past.
	My right hon. Friend the Chancellor was quite right to contemplate all the papers that were put in front of him, and I agree with him that the conclusion that he reached will probably have the greatest impact on the lower-paid families whom many of us represent. It is important for them in terms of their capacity to help stimulate the economy and in terms of their immediate needs, and we should support people that way.
	My next point is about industry. The right hon. Member for Fylde (Mr. Jack) made a point about aerospace, and I totally concur. It is vital that those large projects continue. The case that he explored is vital from the point of view of national defence and because of the importance of that aspect of manufacturing to the economy in the north-west.
	I also represent a manufacturing constituency that is dominated by petrochemicals and vehicles. The vehicle industry's position is different from the last time that we faced an economic downturn, because we are now in a global economy—a point that I made at the outset. Vehicles, like any other product and commodity, are now global products. The Vauxhall Astra, which is made in my constituency, is also made in several other countries, and its components are made globally—as far afield as Australia.
	We need to ensure that in finding a solution, we think globally, and I welcome the fact that Lord Mandelson has made a real commitment—some people describe it as a conversion—to manufacturing. He is meeting the Society of Motor Manufacturers and Traders, and that will be an important discussion. It has been well trailed that the SMMT will press for support through the European Investment Bank to ensure that proper support mechanisms are in place for industries such as the vehicle industry, which is so important to our economy, particularly in the north-west. I urge my right hon. Friend the Chancellor to give every possible line of support to the ongoing discussions, because, if in the worst case scenario, General Motors or Ford goes into chapter 11 bankruptcy, the consequences in Europe will be dire, indeed—not against the background of rubbish products, but against the background of high-quality products that have a future market and deserve protection.
	Finally, I should say that I have been somewhat surprised. Given that the Tories demanded this debate, I thought that we would hear some great alternative solutions from them. What I want to find out from the wind-ups is whether the Opposition are in favour of tax cuts now to boost the economy. Will they vote against the £60 payment to pensioners and the increases in child benefit and tax credit?  [Interruption.] Of course they will have time. Let us hear their views.

Philip Hammond: Through you, Madam Deputy Speaker, I thank Mr. Speaker once again for asserting the right of Parliament to debate this Budget—for that is what it is—before its principal element comes into force next Monday. This is the debate that the Government did not want to have.
	We have heard from the Conservative Benches a reflection of the anger and bewilderment felt in the country and expressed in the media at how Labour has failed once again in its stewardship of our national finances—mortgaging our futures and those of our children and grandchildren to try to secure their own. The Government are frittering away the golden legacy that they inherited from my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) in 1997.
	The Government borrowed through the good years, when more prudent nations were piling up surpluses and they ran a structural deficit when they should have been paying off debt. They have sheltered behind a bogus set of fiscal rules that failed to constrain reckless borrowing in the good times and was promptly junked when the going got tough. As recently as May this year, the Prime Minister was extolling the sustainable investment rule—that debt should not exceed 40 per cent. of GDP. On Monday, without a hint of an apology, the Chancellor told us that debt will now reach 58 per cent. of GDP, casually admitting that the Government will have doubled our national debt to £1 trillion. That is one third higher in real terms than our national debt when we had just finished fighting the second world war.
	Over eight years, the Government have repeatedly projected a return to fiscal balance a few years down the line, and they have repeatedly been wrong. On Monday, they did so again in the pre-Budget report, learning nothing and forgetting everything. The Government project a short and shallow recession while the weight of expert opinion sees a longer and deeper one. The Government claim that Britain is well prepared, but all the evidence from the OECD, the International Monetary Fund and the European Union is that the recession here will be worse than that of any comparable economy. They forecast a rapid return to above-trend growth in 2011 on the basis of no evidence whatever. To gloss over the black hole in their numbers, and ignoring the warning from the right hon. Member for Bolton, West (Ruth Kelly) that revenues will be slow to recover, they assume in the pre-Budget report a fantasy acceleration of growth in Government revenue from 2.8 per cent. a year to 4.1 per cent. a year. That is £20 billion a year in revenue conjured out of nowhere by the manipulation of the figures.
	The markets have not been deceived, and nor should the people be. The cost of insuring British Government debt has increased tenfold, and in the past week it has gone up by 50 per cent., three times the rate for German Government debt. As my hon. Friend the Chancellor observed, thanks to the Government's profligacy—

Philip Hammond: I am sorry; I am getting ahead of myself.
	Thanks to the Government's profligacy, the full faith and credit of the United Kingdom is now rated less highly by the markets than the promises of companies such as Nestlé and British Petroleum. Sterling has declined 25 per cent. against the dollar—more than the 1967 "pound in your pocket" devaluation and more than the 1992 exchange rate mechanism devaluation. And what is the Government's solution? Their big plan, their answer to a recession caused by reckless borrowing and excessive debt, is more reckless borrowing and still greater debt. Their answer is to fund temporary cuts in VAT at a time when prices are falling anyway, and when the Prime Minister and the Governor of the Bank of England are warning against the risks of the deflation, followed by increases at the very point when the economy is supposed to be coming out of recession and will need all the encouragement it can get. Borrow now, pay later.

Yvette Cooper: We believe that now is an important time to use fiscal policy, as do other countries. In Europe, where major countries' debt levels are higher than ours, fiscal action is being supported. The President of the European Commission said just this morning that he is supporting a £160 billion economic recovery package across Europe. In America, for Republicans and Democrats alike, their debt is higher than ours and their borrowing is higher than ours. Yesterday, President-elect Obama announced a fiscal boost of more than 3 per cent. for the American economy, when he said:
	"The consensus is this, that we have do whatever it takes to get this economy moving again".
	Germany, Spain, the US, Australia, Japan, China and other countries across the world are all introducing fiscal boosts for their economies because they know that there is too much at stake for Governments to stand back and allow the recession to take its course. They all know that the nature of the shocks to the financial system, alongside falling inflation, means that monetary policy is not enough. Even the International Monetary Fund has said— [Interruption.]

Madam Deputy Speaker: With this it will be convenient to discuss the following: new clause 6— Contingency funding: power to make regulations
	'After section 214A of the Financial Services and Markets Act 2000 (Contingency funding - inserted by section 164 above) insert—
	"214AA Contingency funding: power to make regulations
	The Treasury may make regulations under section 214A only after it has laid before Parliament a report on the impact of a pre-funded scheme on the classes of person from whom contributions can be levied and whether contingency funding is the best way to achieve the special resolution regime objective set out in section 4 of the Banking Act 2008."'.
	Government amendments Nos. 23 to 26.
	Amendment No. 5, in page 86, line 7, leave out clause 164.
	Amendment No. 17, in clause 164, page 86, line 24, at end insert—
	'(da) arrangements for institutions that have permission under part 4 of the Financial Services and Markets Act 2000 to carry out the regulated activity of accepting deposits (within the meaning of section 22 of the Act, taken with Schedule 2 and by order under section 22) but are not incorporated in, or formed under the law of, any part of the United Kingdom;'.
	Amendment No. 13, in clause 165, in page 87, line 12, after '(2)', insert 'Subject to subsection (2A),'.
	Government amendments Nos. 41 and 42.
	Amendment No. 14, line 18 , at end insert—
	'(2A) Prior to requiring the scheme manager to contribute towards the exercise of the stabilisation powers, the Treasury may require—
	(a) a private sector purchaser to make a contribution where the option under sections 11 or 12 has been exercised, or
	(b) the bank liquidator to make payment where a bank insolvency order has been made, or
	(c) the bank administrator to make a payment where a bank administration order has been made.'.
	Government amendments Nos. 43 to 48.

Ian Pearson: This first group of new clauses and amendments covers a wide range of subjects. I propose, with your permission, Madam Deputy Speaker, to speak to the Government new clauses and amendments, and then to seek to catch your eye at a later point in the debate to respond to the amendments tabled by the hon. Member for Fareham (Mr. Hoban).
	Let me start with Government new clause 11 and Government amendment No. 26, which is consequential on it. As was discussed in Committee, the Bill provides a number of ways for compensation to be calculated and paid to compensatable persons. As hon. Members will know, it allows the Treasury to make regulations to provide for no creditor being worse off following a partial transfer. The purpose of new clause 11 is to make explicit provision in the Bill for the Treasury, the Financial Services Compensation Scheme or other specified persons to pay or contribute to compensation payments under clauses 49 to 61.
	Government amendment No. 26 is consequential on new clause 11. It removes the provisions in subsections (6)(c) and (d) from clause 60, as new clause 11 now supersedes them. In Committee, the hon. Member for South-West Hertfordshire (Mr. Gauke) tabled a probing amendment that questioned whether subsections (6)(c) and (d) were appropriately placed in clause 60. New clause 11 sets out more clearly our intention to ensure that if needed the appropriate persons can pay or contribute towards compensation. These are sensible amendments that reflect the consensual debate that we had in Committee, and I hope that the House will support them.
	Government amendments Nos. 23 to 25 amend clause 60, which, as hon. Members will know, puts in place a safeguard to protect creditors following a partial transfer, as it aims to ensure that they are no worse off than they would have been had the bank gone into a whole bank insolvency procedure. This is part of the package of safeguards on which the Government are consulting. The basic principle that will be implemented in the regulations to be made under the clause is that there should be a comparison of the treatment that creditors of a residual bank created by a partial property transfer receive in fact with the treatment that they would have received in the hypothetical circumstances of the whole bank entering an insolvency procedure. Should that process show that creditors have received less in fact than they would have done in the hypothetical circumstances, the difference is to be made up. As drafted, the hypothetical circumstances used in clause 60 for the purposes of comparison are those of the winding up of the bank. This is a reference to a particular form of insolvency procedure involving the appointment of a liquidator and the realisation of the bank's assets and their distribution to creditors.
	The purpose of amendments Nos. 24 and 25 is to make a technical change to provide greater flexibility. The references to winding up will be replaced by references to a full range of different insolvency procedures, because a bank might end up in some form of insolvency procedure other than the bank insolvency procedure—for example, administration under the Insolvency Act 1986. The amendments aim to preserve the flexibility of the Treasury to select the most appropriate hypothetical circumstances for comparison in secondary legislation.
	Amendment No. 23 is a technical correction to subsection (2) of clause 60, which relates to the insolvency procedure that the residual bank, rather than the hypothetical whole bank, is likely to enter. As a partial transfer is likely to render the residual bank insolvent, and as the residual bank may need to provide services and facilities to the transferee, this procedure is likely to be the bank administration procedure. Again, the amendment provides flexibility to select the most appropriate procedure. I hope that the House will agree to it.
	I turn to Government amendments Nos. 41 to 48 to clause 165. The effect of these amendments is to require the Financial Services Compensation Scheme to be able to contribute up front to the costs of a resolution. Let me briefly set out how such an approach would work. The amendments to clause 165 will allow a "payments on account" approach to be adopted. That would allow the Treasury to impose a requirement early on, possibly immediately after use of the stabilisation powers, for the FSCS to contribute an amount to the resolution. That would be based on an estimate of the eventual payment under clause 165. The FSCS would be obliged to make the payment. Thereafter, there would be an evaluation exercise and an assessment of the final costs of resolution, with a balancing payment being payable either from the Treasury to the FSCS, or from the FSCS to the Treasury. Following the experience of recent resolutions, including the Bradford & Bingley case, it is important to have the flexibility to require the industry to contribute to the costs associated with resolutions before the end of the process. That flexibility could allow the FSCS to start paying, from day one, towards interest costs on any loans from the national loans fund in relation to a resolution. Paying up front could be preferable to leaving the cumulative interest costs to the end of the process.
	I have mentioned the importance of having safeguards to protect the use of FSCS funds, and I should like to reassure hon. Members that current safeguards surrounding the use of such funds will still exist. The safeguarding principle that resolution costs should be capped at the level at which depositor compensation would have been payable had the bank entered insolvency proceedings will be retained, as will the safeguard that ensures independent auditing of the amount that the FSCS will have to contribute. The amendments provide useful flexibility to allow the FSCS to contribute up front, rather than only at the end of the process, while preserving important safeguards to protect the interests of levy payers. I hope that the House will support these amendments. As I have said, Madam Deputy Speaker, I should like to catch your eye later to reply to the hon. Member for Fareham's comments on his amendments.

Mark Hoban: Let me deal first the Government's new clause and amendments. I am sure that my hon. Friend the Member for South-West Hertfordshire (Mr. Gauke) will be heartened to hear that the Government took note of his comments, in Committee, about the appropriate place for the institutions that have been mentioned. We have no problem with that.
	We would expect resolution regime costs to be paid up front, especially in the light of recent transactions in which the FSCS has taken part. The Minister will know that we are not as convinced as he is about the safeguards, and we will discuss the contribution that the FSCS has to make in such situations when we come to later amendments. On the concept of being able to meet up-front payments, we are content.
	The new clause and amendments that I have tabled tackle three issues, the first of which is the pre-funding of the compensation scheme. We touched on this matter in Committee, and I want to revisit it today. The second issue—how to protect people who bank with branches of overseas banks—has caused a great deal of concern to constituents. The third issue is who should bear the costs of the special resolution regime. That has already been mentioned in relation to Government amendments 41 to 48.
	Clause 164 gives the Treasury the power to make regulations for a pre-funded compensation scheme that could cover any part of the financial services sector, not just the banking sector. The argument in favour of pre-funding is that the FSCS needs to be pre-funded to ensure that there are sufficient resources to make a payout to the customers of a failed bank or other financial institution. Currently, the FSCS works on a post-funding basis. There is a levy on financial services businesses through industry groups. One such group, deposit takers, includes banks, building societies and credit unions. Once the levy payable by that group is exhausted, other financial services institutions outside that group will be required to make payments to the FSCS. The scheme is important, in that it has an impact not only on the sector concerned but on others as well.
	When we debated these matters in Committee, the Minister would not be drawn on whether he thought it necessary to have a pre-funded scheme. He thought it appropriate for the powers to be available and for there to be further consultation and discussion on whether that was the right way to proceed. Not knowing whether this will be the next step forward will put the financial services sector in a difficult position, because it will not know what preparations it needs to make. However, the case for pre-funding was not made properly in Committee.
	An argument for pre-funding can be made, and new clause 6, which requires a report to be laid before Parliament before the regulations are made, is a vehicle for making that case. Amendment No. 5, which I have tabled, would remove clause 164 from the Bill entirely. I would like to make it clear that I want to press that amendment to a vote at an appropriate point in our deliberations.

Mark Hoban: The hon. Gentleman makes an important point. In the wider debate on the pre-funded scheme, the Building Societies Association has highlighted instances in which building societies might be called on to contribute to resolutions. It says that the building societies have swallowed their own smoke, to use a phrase beloved by the Minister in Committee, and that a requirement to contribute to a pre-funded scheme would reduce the money available to them to lend to their members, which would perhaps reduce their attractiveness. We need to think about who would contribute to the scheme and what the impact of that would be.
	This is not just about building societies. Credit unions could be placed in a difficult position, as they do not often have huge reserves, but, as deposit-taking institutions, they could be covered by the provisions. Such contributions would take money out of the credit union sector, when that money would be better employed being lent to people than being put into a pre-funded scheme.
	The case has not been made for a pre-funded scheme, and there are strong arguments against introducing such a scheme. The first is that the important point is not whether the scheme is pre-funded but whether it has access to liquidity and resources to enable it to make payments to customers when a bank has defaulted. The second argument asks whether a pre-funded scheme would be the best use of assets. We have touched on that question in the context of building societies, but I want to make some broader points on that in a moment. Thirdly, while this debate has been primarily about pre-funding in the event of a bank failure, the powers in the clause could require other financial sectors to contribute to a pre-funded scheme to rescue a bank—or, indeed, any other financial institution.
	The Bill makes provision for the scheme to access the national loan fund. This is what has happened in the context of Bradford & Bingley, where money has been borrowed from the Government to lend to Banco Santander to cover the deposits. Consumers are given confidence not because there is a pre-funded scheme or a pot of money already sitting there, but because a bank has access to resources that enable the Financial Services Compensation Scheme to make payments to customers in the event of a default. With a post-funded scheme, a reasonable amount of time would need to be allowed to recover the money from the bank, so as not to put undue strain on the balance sheets of banks, building societies and other deposit takers at a time when the whole financial system is under distress.
	Given the increasingly concentrated nature of the UK banking system, the pot of money that it would be necessary to build up against any failure would be quite significant. The position is very different from that in the US, which has a much more fragmented banking system. It also has the Federal Deposit Insurance Corporation and needs to have a pre-funded scheme, because the likelihood of a bank failing is much greater, given the sheer number of institutions involved.
	A pre-funded scheme would be capital-intensive, and the second argument is that that money would be better used by a bank, building society or credit union, rather than being tied up in the Financial Services Compensation Scheme. Accumulating the fund could increase the pressure on bank capital and liquidity. There is also the possibility—at least we hope so—that once the scheme had been built up, it would never be used. We have gone through a period of extreme volatility and instability, and I am not sure of the value of having a significant sum sitting in the hands of the FSCS that might never be used. We do not expect another comparable period of financial instability, and there are better ways to use that money than having it tied up in that way.
	The report envisaged in new clause 6 would be a good way to set out the arguments about a pre-funded scheme. Before the Government laid regulations in this area, the House would have to be persuaded that this is the right approach.
	The third point is that the pre-funding debate encroaches on more than just the banking sector. The hon. Member for South Derbyshire (Mr. Todd) talked about building societies, and there are other categories of deposit-taking institutions, such as credit unions. There is also concern in other parts of the industry that they would have to pay the costs of mistakes in the banking sector. The Association of British Insurers has said:
	"We are concerned...that the present approach requires all sectors of financial services to contribute to the costs. This involves cross subsidy which imposes an unfair burden on the insurance industry, particularly in cases where, as in Bradford & Bingley, insurers have already made substantial contribution through the provision of additional capital by their investment arms."
	Several insurers subscribed to the rights issue, and they would be doubly penalised if they lost that money and had to make an excess payment to the FSCS. The present arrangements mean insurers could end up paying twice.
	A powerful case has been made that a pre-funded scheme is not the appropriate approach. There is another argument to be made, and we will come to that in the debate on the special resolution regime in the next group, but I shall flag it now briefly. For customers, the best deal is continuity of service. They want to be able to go into their bank and withdraw cash, or have their cheques cashed, use their debit cards and have their standing orders and direct debits honoured. They do not want to have to wait for five days, seven days, a month or however long it takes for the FSCS to send them their cheque. Continuity of service is a much better way to resolve the problem than dependence on a compensation scheme. If continuity of service were the priority for protecting depositors, we would not need a pre-funded scheme.
	The argument for a pre-funded scheme has not yet been made strongly enough. The arguments against it are much stronger, which is why I have tabled new clause 5.
	Amendment No. 17 is a probing amendment, and flags up a debate that we had in Committee, although it was truncated. It concerns the challenge posed under the passporting arrangements for financial institutions in the European economic area. That enables an institution regulated in one state to establish a branch in another. It is part of the liberalisation of financial markets in the EU. The home state acts as a prudential regulator, looking at capital and deposit protection, while the host state—the country in which the branch is established—looks after the conduct of business rules.
	It was those rules that enabled the Icelandic bank Landsbanki to establish a branch trading as Icesave in London. Icesave was able to upstream some of the money attracted from UK depositors to Landsbanki in Iceland to reduce its dependence on funding from wholesale markets. Customers of Landsbanki would have realised that they were covered up to £50,000 under the deposit protection schemes in place when Landsbanki went into administration.
	The first layer of the protection was under the Icelandic guarantee scheme, while the second layer was a top-up from the FSCS. However, as events have demonstrated, the first layer of support depends on the capitalisation of the bank and, in this instance, on the sovereign guarantee of the home country. In the absence of support from the Icelandic Government, the UK Government could have been on the hook for that first layer of protection.
	That problem has been resolved by the IMF and UK loans to Iceland, but it illustrates the challenges that we face. As EU financial services markets are liberalised, customers are being put at risk because they depend on the home state for an element of consumer protection. I raised this matter in a debate on a European directive, when the Minister's predecessor, the present the Secretary of State for Children, Schools and Families, was Economic Secretary. It was not adequately resolved then, and the Treasury and the FSA need to think very carefully about how we alert UK consumers to the risk that they face when they do business with a branch of an institution incorporated in another EEA member state. That is a lesson that we need to learn from the debates about Landsbanki and related matters.
	I turn now to amendments Nos. 13 and 14 in this group. Clause 165, as drafted, sets out how the special resolution regime is to be paid for and provides for the FSCS to contribute to the cost of a resolution regime. Initially, that contribution will be made by the deposit-taking sector: when it exceeds the levy from that sector for a year, it will be picked up by other contributors to the scheme. The amendments would insert into the clause a recognition of what would happen ordinarily when a business is either acquired by a private sector company or goes into liquidation or administration.
	Traditionally, the cost of a private sector acquisition is borne by both the vendor and the purchaser. For a company that goes into liquidation or administration, the costs of resolving the problem that I have described are borne by the shareholders and creditors. It is important that that is clear. Rather than it being discussed by way of a comment in Committee, or put in the code of practice, it should be in the Bill, so that people know fully who is expected to pay for the resolution regime.

Ian Pearson: My hon. Friend is exactly right that the FSA is consulting on many the relevant issues, but it is not currently possible to say what the outcome will be. There is a clear policy issue and a clear public interest in ensuring that the basis on which people put their money into banks, and the guarantees that underpin them, are clearly understood and communicated, and we want to ensure that that is sorted out.
	The hon. Member for Fareham raised in Committee the matter relating to amendments Nos. 13 and 14, and I have set out before the reasons why it is important that the FSCS contributes to the costs of the special resolution regime, therefore I shall not repeat them in detail here. From what the hon. Gentleman said, I understand that his concern is to ensure that other persons, particularly a private sector purchaser or the insolvent estate, contribute to the costs of a resolution before the FSCS is called upon, and his amendments seek to achieve that.
	Let me set out why I have sympathy with the general principle but do not agree with his amendment. As I said in Committee, I agree that in some circumstances, a private sector purchaser should be called upon to contribute towards resolution costs. However, there are also certain circumstances in which it would not be appropriate for them to be required to do so. For example, there may be administrative costs or additional compensation costs that a private sector purchaser would not be willing to pay, and any requirement that they do so might reduce the likelihood of a successful private sector solution, therefore I do not believe that, in all cases, the private sector purchaser should pay resolution costs before the FSCS or the authorities.
	I have significant concerns about imposing the proposal that the insolvent estate fund resolution costs before any call upon the FSCS is made. Taking money out of the estate to fund resolution actions would lead to a smaller pot of money from which creditors and others would benefit. We wish to avoid that situation, as demonstrated by the "no creditor worse off" safeguard, and by objective 5 of the special resolution regime which emphasises the importance of minimising interference with property rights. In the case of one of the more likely resolution actions, a deposit book transfer, funding the resolution out of the insolvent estate might result in a de facto depositor preference regime, which the Government have sought to avoid, with the support of banks and investors in banks.
	Of course, the cap will ensure that any recoveries that the FSCS could have secured from the insolvent estate had it paid out in the normal way will be taken into account. The FSCS will not be required to pay more than it would have paid under a normal payout. Although the private sector purchaser may be called upon to contribute in some circumstances, I hope that I have explained why I do not think that they should be the first port of call in all circumstances, and why there are also risks with requiring the insolvent estate always to be called upon before the FSCS.

Mark Hoban: That is absolutely right. It might be possible to hold a bank in its entirety in the bridge bank mechanism, with a view to managing it to be sold as a whole bank. There is no sense that considering one option excludes another. I will not ask to put our amendments to the vote; rather, they are intended to probe the Government's thought processes and clarify how they would address the various solutions, given the complexities that are attached to the bridge bank and temporary public ownership.
	New clause 9 deals with an issue that we touched on earlier—how to protect depositors in the event of a bank failure. There are gaps in the Bill. First, it is not clear who decides whether payment should be made to consumers or the account should be transferred, as in the case of the Bradford & Bingley, into another bank. New clause 9 was tabled to probe that issue. I have suggested that the FSCS, having consulted the other authorities, should make that decision. I am not sure that the Bill as drafted tells us who should make that decision or what the decision-making process should be. The new clause helps to flush out that issue.
	For depositors, I believe that the best solution in principle is the ability to go to another bank the next day to withdraw funds. If we want to protect depositors, we should make it clear that the best way of doing that is by providing that continuity of service—the Minister's first point when he moved the Government amendments. The sub-optimal solution, but it may be a necessary solution, is payment through the FSCS. As demonstrated with the Icelandic banks when deposits were moved to ING Direct, that was a much better process. It was preferable to dependence on the FSCS for people in Icesave, parts of Kaupthing Singer & Friedlander and Heritable or others that ING Direct did not wish to acquire. We need to signal that, wherever possible, a straight transfer to another bank is the preferred solution. That will give customers the most satisfaction and the most confidence in the banking system. It also somewhat removes the need for a pre-funded scheme, but that is a debate and vote for later. There are many ways to approach the issue.
	New clause 10 deals with the publicity that should be given when the stabilisation powers have been exercised. One challenge that arises from the Bill is that it will give the authorities some quite significant powers, but there is a lack of transparency about how they will be used. The code of practice gives some guidance about their use, but in reality, the proof of the pudding will be in the eating. Only when we have seen the powers exercised will we know the constraints within which the authorities are working or the relevant thought processes. People will learn from those precedents how the powers will be used in future.
	New clause 10 has various elements. The FSA needs to show how it believes that the threshold conditions have been breached, which will then trigger the stabilisation powers, and it will then be for Treasury and the Bank of England to explain why they used those particular powers in the way that they did. We debated publication in Committee. I am mindful of the risk that confidential information is relevant, which might in itself pose a threat to financial stability. It is important that information released initially should not be prejudicial to financial stability, but it can be published at a later stage. It is important that the audit trail is made available. The process of publication is dealt with in the code of practice, but the code is non-binding and does not have legal status. It is an important issue, so ensuring that there is proper disclosure of how and why the powers have been used should be built directly into the Bill.
	Amendment No. 74 relates to one of the issues on which we have engaged in a certain amount of debate: how the interests of creditors will be taken into account. The Bill contains some safeguards. The Minister said earlier that no creditor would be worse off, although compensation would depend on the way in which the powers had been exercised. Despite that, however, there are still concerns about the impact of the powers on the rights of creditors, and about how the Government will look at those rights when considering which powers to exercise. It would be helpful if the code of practice included a requirement for the issue to be properly discussed. In Committee we tried to amend the objectives to take account of the rights of creditors, but I think that there is a different way of trying to ensure that that happens.
	Amendment No. 9 and the amendments that follow it relate to the exercise of the threshold conditions. In Committee, we debated the threshold conditions set out in FSMA. They are fairly broad, and not very tightly focused. In amendment No. 8, I suggest that we focus particularly on the part of FSMA that relates to adequate resources, because that is the issue that seems to have aroused the most concern in the context of Bradford & Bingley and the Icelandic banks. We need to know exactly what the FSA is looking at. Amendment No. 9 is complementary to amendment No. 8: it asks the FSA to publish guidance on what it would consider to be a breach of threshold conditions.
	I am aware that we are not discussing a straightforward quantitative exercise. There will not be red lights for various ratios; there will be a combination of qualitative and quantitative assessment. However, I feel that we need some guidance from the FSA, and that it should be contained in the code of practice, which is the text from which people will work when examining the way in which the powers in the Bill will be used and what the constraints are. I am keen to ensure that the guidance covers the exercise of those threshold powers.
	In Committee, we debated the process whereby the FSA would consider whether the Treasury conditions had been breached, following which the Treasury and the Bank of England would have to consider how to use their stabilisation powers under clauses 8 and 9. There appears to be a slight disconnect in the Bill: there is no guarantee that identification of a breach of threshold conditions by the FSA would lead to the exercising of the stabilisation powers of either the Treasury or the Bank. It is plain to me that the process is ongoing and not linear. Amendment No. 12 makes it clear that before exercising its trigger powers, the FSA must have confirmed, in consultation with the Bank and the Treasury, that action will be taken to rescue a failing bank.

Ian Pearson: In new clause 8, the hon. Member for Fareham (Mr. Hoban) seeks to establish a statutory basis for the order in which the authorities must consider the stabilisation options of the special resolution regime. The Government consider it appropriate for a range of options to be available for the resolution of the problems of failing banks. Banks may fail for a number of reasons in many different circumstances, and the optimal solution may be different in each case.
	Of course, resolution by way of the transfer of a failing bank to a private sector purchaser will generally be the authorities' favoured option, but I have emphasised during our debates that the choice of stabilisation option will be determined by an assessment of the special resolution objectives. We do not agree with the principle of ordering the stabilisation options. Forcing the order to be followed under primary legislation could delay or harm the chances of a successful resolution, and could constrain the flexibility with which the SRR tools can be applied in accordance with the individual demands of particular circumstances.
	The Government have already made it clear that temporary public ownership is an option of last resort. That is demonstrated by the test for intervention in clause 9, which we discussed extensively in Committee, so it is unnecessary to describe this further in the Bill. I also remind the hon. Member for Fareham that the draft code of practice makes provision on how the authorities will select which tool to use, so I hope that this provides a clear indication of how the authorities will consider the relative merits of each stabilisation option.
	On new clause 9, I do not agree that the financial services compensation scheme should have control over the onwards management of a bank once the stabilisation powers have been exercised. First, once the bank or banking business has been transferred, it will be controlled by another party. Secondly, it would be inconsistent for the FSCS to decide how depositors should be protected in such circumstances, as that would impact on how the bank or banking business should be controlled. The FSCS has an operational role in paying out compensation, but it is not a strategic decision maker in the context of the SRR. I also do not agree with the prioritisation of the objective to protect depositors—objective 3—to the exclusion of the other objectives in this proposed new clause. Objective 3 must be considered alongside these objectives, but not to the exclusion of them.

Ian Pearson: We explained at length in Committee how the system works in terms of the responsibilities of the authorities in the tripartite arrangement. The FSA takes lead responsibility in determining whether the threshold conditions have been met, and the Bank of England is the lead authority in determining which of the stabilisation options should be pursued. We believe that this is a clear mechanism, and that it is right that the Bank of England should have the lead responsibility in this area. In such circumstances, the tripartite will work together extremely closely, and the Bank of England will consult the FSA and the Treasury on the exercise of the stabilisation options.

Mr. Deputy Speaker: With this it will be convenient to discuss new clause 2— Reversion of rescued former building societies to mutual status
	'(1) This section applies in respect of any company to which subsections (2) and (3) apply (and which is referred to in this section as a "rescued former building society").
	(2) This subsection applies if—
	(a) the assets and liabilities of a building society (within the meaning of section 119 of the Building Societies Act 1986 ("the 1986 Act")) have been transferred to the company, and
	(b) the company continues to trade under the name of that society (or under a similar name).
	(3) This subsection applies if—
	(a) an order under section 3 (transfer of securities issued by an authorised UK deposit-taker) or 6 (transfer of property, rights and liabilities of an authorised UK deposit-taker) of the Banking (Special Provisions) Act 2008 has been made in relation to the company, or
	(b) the company has taken part in the bank recapitalisation fund announced by the Chancellor of the Exchequer on 8th October 2008, or
	(c) the company is subject to any of the stabilisation options provided for in sections 10 to 12 of this Act.
	(4) The Treasury must by regulations make provision enabling rescued former building societies to reconstitute themselves as building societies within the meaning of the 1986 Act.
	(5) Regulations under subsection (4) may—
	(a) disapply or modify the effect of a provision of an enactment, or
	(b) disapply or modify the effect of a rule of law not set out in legislation.
	(6) Regulations under subsection (4)—
	(a) shall be made by statutory instrument, and
	(b) shall be subject to annulment in pursuance of a resolution of either House of Parliament.'.

Harry Cohen: I thank Mr. Speaker for selecting this new clause.
	A lot has happened in a short period in relation to the banks and the economy, and the situation has moved on rapidly. However, I do not want to fail to deal with the issue of excessive bonuses, which has rightly enraged the public—our constituents. The new clause addresses that. It refers to the Treasury making
	"regulations on the remuneration of senior staff of rescued bank"
	such that
	"senior staff are given no financial incentive to take unnecessary and excessive risks that threaten the value of the rescued bank",
	such that
	"a rescued bank may recover from a senior member of staff any bonus or similar payment which is based on statements which are later shown to be materially inaccurate"
	and such that
	"a rescued bank may make no golden parachute payment to its senior staff."
	That wording is not the whim of a left-wing Labour Back Bencher, nor is it anti-banker vindictiveness, although I feel a bit of that, as do my constituents. Its provisions were written into the $700 billion Paulson bail-out package by the US Congress, and this wording is the closest I can get to that. I thank the Library and the Public Bill Office staff for drafting it in that way. Congress has a Republican majority, but both Republicans and Democrats required those provisions to be included in any bail-out proposal.
	The truth is that the level of bonuses has been an absolute scandal. It is totally unacceptable that there should be any bonuses if it is taxpayers' money that saved the institution from failure. It is unbelievable that directors are paid for failure and for jeopardising the public interest, at a time when they are costing taxpayers a great deal of money, when they are jeopardising their customers' livelihoods and those of countless businesses and individuals, and when they have got into a situation where the banks own a huge amount of toxic debt and effectively seize up. In those circumstances, bonuses should not be paid—in fact, they should be clawed back from the directors who got the bank into that situation. The new clause would require that no bonuses should be paid for risky activities and that we get some repayment where they have been paid on a false or inaccurate basis. That is what the US Congress said; that is what we should say as well.
	The new clause applies to the rescued banks package, and I wanted to tie it to the US Congress provisions, but it should apply not only to the rescued banks but to all the banks. They are all part of the bail-out process. Even if they are not benefiting from the direct recapitalisation in terms of preference shares, other parts of the package referred to £200 billion being available in short-term loans from the Bank of England—that went up from £100 billion—and to £250 billion in loan guarantees being made available at commercial rates to encourage banks to lend to each other. Those are huge sums of public money that have gone to banks other than the rescued banks that we have taken preferential shares in, and they should also be subject to restraint and control over bonuses.

David Taylor: I shall be coming to that point, but my hon. Friend has identified a good and close parallel.
	To paraphrase the manager of the then Halifax building society, offer people a sufficient amount of money and you can convince them of anything. In circumstances that had never been seen before, building society members stood to receive windfalls for doing little more than turning up and voting. Unsurprisingly, that led to significant numbers of speculators opening an account for the minimum necessary amount, gaining voting rights and thereby shamelessly manipulating society votes in favour of demutualisation.
	Even at the time, the benefits were questionable. On the basis of a projected pay-out of £2,000 per head, Bradford & Bingley members voted for conversion, but in reality the average conversion turned out to be worth less than one third of that, at £650. Customers with modest savings doubtless benefited from the effort-free handouts on offer, but those with more substantial sums invested were trading short-term gains for long-term losses. In many cases, people with their life savings invested in mutual institutions would have made far more in interest alone over the past 10 years than the few hundred pounds that they walked away with at the time. When they lost their mutual status, the building societies lost their ability to offer higher interest rates, and they also lost their security.
	However, the incentives for senior managers were never in doubt. The pay increases that come with executive management of investor-owned rather than mutual companies guarantee positions in the newly created and higher-status organisations. The urge to increase the business rather than improve the service, as well as profit-linked salaries and a generous dollop of testosterone, all help to drive executive enthusiasm for conversion. We can still feel the power surging through the boardrooms of the former building societies 10 years ago, even though we are 10 years on.
	In the case of the Cheltenham & Gloucester takeover by Lloyds, as it then was, sweeteners included share options for the chief executive worth four times his salary, as well as cash payments to the chairman, the chief executive and their families totalling nearly £100,000. The figures from the demutualisation vote of Bradford & Bingley in 2000 paint a picture that was replicated in many conversion votes throughout the '90s. The following is a direct quote from the paper to which I referred earlier:
	"the legislative requirements on voter turnout and voting support required for investors were set at higher thresholds than those for borrowers. In the case of investors, turnout and support requirements were 50 per cent. and 75 per cent. respectively, while in the case of borrowers there was no turnout requirement and only support by a majority vote was required for a conversion resolution to pass. Although the high thresholds set for investor members were intended to provide protection for the borrowers, in practice they may also have made it more likely that investors would vote, so tilting the outcome in favour of conversion...although overall the vote was in favour of conversion (62 per cent.), 60 per cent. of borrowers who took part voted in favour of the society remaining mutual. The result did not pass the statutory hurdle for conversion decision to go ahead; it was the board"—
	what a surprise—
	"which took the decision to initiate conversion proceedings on the basis of the result."
	I would like to see an opportunity for re-mutualisation. Mutual savings organisations are owned by their members. Members have a vote, and so a voice, in decision making. The company is incentivised to work for the interests of its members, not its shareholders, and still less its financiers. We must not forget that mutuals can often offer better savings and borrowing rates. They are an investment for the long term. They offer security and dependability.
	According to two independent surveys in the late 1990s, mutual building societies consistently offered the best loans over a variety of payment periods. The surveys found that nine of the 10 cheapest lenders in the UK were mutuals. Another survey shows that the cheapest 30 lenders throughout the 1990s, and the 10-year period in question, were all building societies. There is evidence, cited in the paper that I mentioned, that demutualisation exacerbates financial exclusion. The total number of building societies has fallen from more than 200 to fewer than 60 in the past 25 years. Financial institutions were merged or taken over, and their branches rationalised in the drive for efficiency.
	The recognisable, reliable and—above all—reachable branches that served many of the poorest and most vulnerable in communities across the country, including in North-West Leicestershire, have disappeared in the stampede towards petty pecuniary advantage. That was not just morally wrong, but largely mistaken. Work done during the height of the fad for demutualisation showed that building societies have tended to operate with greater efficiency and higher and less volatile profitability than commercial banks. It is surely no coincidence that credit unions have increasingly filled the gap left by the evisceration of mutual institutions.
	The need for stable, low-interest loans never went away, even during Labour's years of record economic growth and reinvestment in infrastructure and public services. The reach of mutuals is still short, however, and the respite that they provide to struggling families will be stretched in what will no doubt be a discontented winter.
	I close my remarks with a point made by the finest and greatest of the post-war Labour Prime Ministers, Harold Wilson. He said that our party
	"is a moral crusade or it is nothing."
	For 10 years, we have helped to foster the best of times; we must now reach out to the most vulnerable among us in the worst of times. We in this House, whose job it is to take time to consider such matters, owe it to those in this country whose primary concern is to feed, clothe and support our families, to do whatever it takes to help them to achieve financial inclusion and security. Back in the year 2000, my party's Government, who have had so many remarkable successes, singularly failed on a number of occasions to show the leadership necessary to stem the tide of carpetbagging and demutualisation. A number of Members of this House were gravely concerned at the predatory actions of well-organised groups of carpetbaggers, stalking the mutual sector for easy pickings from which almost effortlessly to extract profits.
	The Prime Minister was asked whether he shared many of the concerns of my hon. Friend the Member for Leyton and Wanstead (Harry Cohen) about the behaviour of carpetbaggers. The obvious moral odiousness of that behaviour presents a significant threat to the ability of building societies to provide resources for affordable housing to those on low incomes.

Adrian Bailey: I support the measure proposed by my hon. Friend the Member for North-West Leicestershire (David Taylor), and I wish to make it clear that as chairman of the all-party group on building societies and financial mutuals, I completely endorse his arguments.
	When the vote on Halifax demutualisation was held, I was one of the 3 per cent.—[ Interruption. ] Indeed, my hon. Friends were, too. To anticipate an intervention from the hon. Member for Castle Point (Bob Spink), may I make it clear that my deposit is honourably held by the West Bromwich building society, which has retained its mutual status? The all-party group has conducted a number of exercises that clearly demonstrate the important role that the mutual sector plays in the financial services industry, and the added advantage that it brings not just to the financial services sector as a whole but to individual investors and borrowers.
	The all-party group held a Select Committee-style inquiry that sought to examine the relative advantages of the mutual sector in providing value for money compared with the proprietary banking sector. That inquiry clearly demonstrated that, by and large, building societies provided higher rates of interest for investors and lower mortgage rates for borrowers. Even today, if one looks at the tables of best buys in most of the Sunday newspapers, that practice is substantiated by building societies' high ranking in comparison with banks.
	We held another inquiry on the impact of demutualisation on people who had invested in the relevant organisations both before and after demutualisation, which clearly demonstrated that, on the basis of the figures, anyone who received a windfall from a demutualised bank subsequently lost the benefit of that windfall in the organisation's relatively poor performance and deals. In practice, that process was not financially advantageous to people who had formerly been members of the building society. We invited a range of people from all sectors—banks that had been mutuals, building societies, and even carpetbaggers—to that Select Committee-style inquiry to give evidence. I treasure one particular letter. The chief executive of Northern Rock declined to appear before the committee—surprise, surprise—but he submitted a letter stating that Northern Rock was very competitive, that it provided value for money and that its 100 and 120 per cent. mortgages were incredibly popular among consumers.
	I understand that there are potential financial obstacles to the adoption of new clause 2. It is designed to set a legal framework, which, notwithstanding such financial obstacles, would at least ensure no legal impediment in the event of its being a financially viable option in future.
	For the sake of brevity, I will not develop my argument for too long. I note that clause 72 allows the Treasury to take a building society into temporary public ownership by order. New clause 2 provides an equivalent reverse process for the Treasury to provide a legal mechanism by which former banks could be rescued and put into mutual ownership. I would be very interested to hear the Minister's response on that point, because it is important that we have a legal framework which, notwithstanding any financial considerations, provides a level playing field and recognises the unique role played by building societies in financial services in this country.

Ian Pearson: Directors of the recapitalised banks are very much in the public eye and will continue to be so for the foreseeable future. We have been very clear about the conditionality that we want on executive remuneration, and we will continue in that manner. We have powers to the banks, and we have absolutely no reason to believe that they will not continue to take a fair and appropriate line on directors' pay and executive bonuses. We certainly do not condone any reward for failure, and we expect the relevant bank's board to support the removal of any directors for a failure to deliver against their agreed strategic objectives.

Ian Pearson: The hon. Member for South-West Hertfordshire (Mr. Gauke) seeks in new clause 3 to impose a requirement on the Treasury to publish an annual assessment of the efficacy of the partial transfer safeguards.
	As the hon. Gentleman will be aware, we need to get the safeguards right, and I am absolutely committed to that. That is why I decided to establish an expert liaison group. Indeed, the stakeholder feedback that the Government have already received led us to introduce an amendment to the Bill to formalise the status of the group in primary legislation, as set out in clause 10. That move has been widely supported by the industry and, to be fair, by Opposition Members. When we are talking about such legislation at the level of technical detail that we often are, it is right to work with the experts and in effect co-produce the secondary legislation, in addition to keeping such matters under review.
	In putting the group on a statutory footing, it is implicit that the Government will have regard to its recommendations. Clause 10 therefore provides a mechanism for us to receive regular and expert feedback, to which we will pay due consideration. The Government consider it desirable to retain the flexibility to adjust and refine the safeguards in the light of experience. That is particularly important in the context of the set-off and netting safeguard, for instance, because those arrangements have proven to be a highly innovative field. Changes to the safeguard may be necessary to ensure not only that it continues to protect what it is intended to protect, but that innovations do not undermine the policy aims that the special resolution regime is intended to serve.
	I agree with spirit of the new clause that the hon. Gentleman has tabled, in the sense that reviewing safeguards is important. However, that is best done through the mechanisms that I have outlined and which we are already putting in place, in particular the expert liaison group, rather than the approach that he suggests in new clause 3. If he reflects on that, I hope that he will decide not to push the new clause to a vote.
	As right hon. and hon. Members are aware, banks comprise complex, multi-jurisdictional corporate entities. Set against that background, many of the provisions of the special resolution regime interact with and sit alongside financial services, banking, company and insolvency law. It is therefore clear that the legislative environment is both complex and varied—I think that the hon. Member for South-West Hertfordshire can see where I am going with this.
	There will inevitably be some degree of conflict between the public interest objectives of resolving a bank in severe financial difficulties and the provisions of legislation that are designed to work in relation to a normally functioning business. When hon. Members reflect on that for a moment, I hope that they will see that it is surely right. It is one thing to have legislation that applies to normally functioning businesses, but with a bank or building society failure, quite different and difficult circumstances arise. For that reason, we believe it is crucial to take a power to amend the provisions of primary and secondary legislation and common law, but to do so in a narrow way, which I will go on to explain in more detail.
	In the absence of such a power as provided for in clause 72, or clause 65 as it was in Committee, there is a real and significant risk that the authorities will not be able fully to effect a transfer, which could impact on the effectiveness of the powers in the Bill. That could lead to serious and adverse implications for the public interest through risks to financial stability, to the protection of depositors and to public funds. It could also impact on the likelihood of achieving a private sector solution.
	The purpose of the power is to provide the Treasury with the means to modify legislation to enable the powers of the special resolution regime to be used more effectively. This is set out in clause 72(1), which we debated at some length in Committee. I want to make it very clear that this is not a general power to amend legislation; it is targeted and limited. In particular, the power may be used only to facilitate the use of one of the stabilisation options, so the scope is severely constrained to amending legislation that affects the resolution of banks that are under the special resolution regime.
	I emphasised in Committee that the power would not be used to modify the Bill—a concern expressed by a number of hon. Members who contributed to the debate at the time. I highlighted the fact that the Treasury would not use clause 72 to amend the legislative safeguards either in the Bill or in secondary legislation made under it. It would be inappropriate to use the clause to amend the safeguards that we are putting in place. The Government have no intention to use the power in that way, which I want to make absolutely clear.
	I committed to discussing issues relating to legal certainty and the expert liaison group. I can inform the House that I will write to the group and undertake specific consultation on this very matter. In light of the ongoing consultation with stakeholders, the Government consider it appropriate to make it clear that the powers in clause 72 cannot be used to amend the Bill's provisions; we want to reflect the concerns expressed in Committee. This extends to primary legislation and any secondary legislation made under it—so, for example, in relation to the netting safeguard, which is one of the key safeguards of particular interest to stakeholders, both the enabling power and the statutory instrument made may not be amended by the power. I hope that that addresses stakeholders' main concern about the power conferred in clause 72. We have directly responded to the concern and remain committed to working with the industry on issues relating to legal certainty. I believe that when it comes to transactions, it is vital for the industry to be able to have clean legal opinions. We will continue to work with the industry, but we believe that the provisions are appropriate, so we can give the industry the assurances it requires.
	In amendment No. 2, the hon. Member for South-West Hertfordshire proposes that a sunset provision be added to clause 72. This would provide the Treasury with the power to change the law for two years, but it would then lapse. I do not believe that the amendment would be in the public interest, so let me explain why. We cannot be sure that the hindrances and difficulties faced by the authorities in resolving any bank failures in the next two years will be the same as in a future period. It is possible, for example, that the nature of the banks being resolved will be different in subsequent years, with the result that different pieces of legislation need to be modified so that a successful resolution can be effected. In our view, therefore, a sunset provision is not appropriate because of the need to ensure that the legislation is future-proof as banks and financial markets develop over time.
	We reflected on that issue at some length in Committee. I think it is right that we try to future-proof legislation as much as possible, and we do not consider that a two-year sunset clause would be appropriate in this instance. That does not mean that I would reject the concept of the use of sunset clauses in other contexts. Indeed, as the hon. Gentleman knows, the Banking (Special Provisions) Act 2008 contains a sunset clause, which is not the least of the reasons for our present consideration of the Banking Bill.
	New clauses 4 and 5 would confer powers on the Treasury in relation to exempting directors and the financial services ombudsman. In Committee, as the hon. Member for South-West Hertfordshire mentioned, I cited specific instances in which the Treasury might use the power to change law. I understand that the hon. Gentleman wishes the Government to prescribe the pieces of legislation that they wish to amend, and to include them in the Bill. I must admit to feeling slightly guilty about selecting a couple of examples in an attempt to be helpful and clarify matters, and then discovering that I had probably not clarified matters to the hon. Gentleman's satisfaction.
	I accept that both new clauses give the Treasury certain powers that may be useful in resolution and may make the exercise of the stabilisation powers more effective. However, the examples that I gave in Committee were intended to illustrate the wider point that there are pieces of legislation that we can identify as needing to be amended, but others to which, as things stand, that does not apply. We cannot know the specific stabilisation options and the particular circumstances of a failing bank in the future, and what might need to be done.
	Even if the Government were to introduce measures such as new clauses 4 and 5, the powers in clause 72 would still be necessary. As I said in Committee, it is not possible to provide an exhaustive list of the legislative proposals that the Treasury may need to modify, because it is not possible to foresee each and every circumstance surrounding the failure of each bank and which pieces of legislation may be relevant to the resolution. If that were possible—again, I explained this in Committee—there would be no grounds for taking the power, and we could and would have included the relevant changes in the Bill.
	The Government also consider it more appropriate to preserve the generality of the power by not introducing examples into the Bill. We do not think that it would be advantageous to give the impression in legislation that these were the only parts of law that the authorities might need to modify in order to effect a successful resolution.
	I recognise that clauses such as clause 72 are potentially controversial because they include a power to amend primary and secondary legislation by order, but they are not exceptional clauses. It is not the case that such measures have never been allowed through Parliament before. Nevertheless, it is right for them to be subject to rigorous scrutiny. I consider that our action in limiting the nature of the clause is appropriate. I hope I have reassured the House not only about the way in which the clause should be construed and the significant practical limitations of the power to amend law, but about why it is necessary for that power to be taken.

Mark Hoban: Thank you, Mr. Deputy Speaker. As I was saying, the Bill sets up the financial stability committee of the Bank of England, a sub-committee of the court of directors. Its role is to contribute towards protecting and enhancing the stability of the financial systems of the UK—described in the Bill as the financial stability objective.
	One of the issues that has developed over the course of the past 10 years is the build-up of an asset price bubble. We have seen the fastest rise in house prices in the developed world taking place in this country. That period of asset price rises has been fuelled by significant expansion in the levels of debt in the economy as a whole. That is why we enter this recession with the highest level of personal debt among major industrialised countries. In that 10-year period, while the FSA supervised the activities of individual financial institutions, no one had the role of monitoring and responding to overall levels of debt in the economy—especially since the Government introduced their reforms of financial regulation in 1997. That is a major omission that contributed the asset price bubble that we see today, and the bursting of that bubble is causing misery to families and businesses up and down the country.
	We cannot allow that situation to go on. That is why we propose a debt responsibility mechanism, a form of macro-prudential regulation that will enable the Bank of England, as part of its process of identifying financial risks in the economy, to write to the FSA to require it to take into account its concerns about the level of debt, and to look at the way in which it supervises and monitors capital levels in individual financial institutions. This is an idea that we proposed towards the end of September. Since then, the Bank of England, in its financial stability report, has called for the introduction of macro-prudential regulation, echoing some of the concerns that we have had about the asset price bubble. That was followed by speeches by John Gieve and Charlie Bean, both executive directors of the Bank of England, so we believe that it is time to reform the regulation of the financial services sector to prevent the recreation in the future of further debt-fuelled asset price bubbles. New clause 7 gives us the opportunity to do so, and it will be a major improvement in the way in which we regulate the financial services sector—
	 It being three hours after the commencement of proceedings on the motion , Mr. Deputy Speaker  p roceeded to p ut the Questions necessary for the disposal of business to be concluded at that hour , pursuant to Order [this day]. .

Mr. Deputy Speaker: I can well understand the hon. Gentleman's disappointment at not being able to hold his Adjournment debate this evening. I am not in a position to guarantee these things, but I am quite sure that he will be able to present that debate early in the next parliamentary Session.
	 Sitting suspended,  pursuant  to Order  [ 20 November ]

Mr. Speaker: ( in the Clerk' s place at the Table): I have to acquaint the House that the House has been to the House of Peers, where a Commission under the Great Seal was read, authorising the Royal Assent to the following Acts.
	Education and Skills Act 2008
	Local Transport Act 2008
	Climate Change Act 2008
	Counter-Terrorism Act 2008
	Planning Act 2008
	Pensions Act 2008
	Dormant Bank and Building Society Accounts Act 2008
	Energy Act 2008